One Bad Apple Don't Spoil the Whole Bunch

An interesting Blog came up yesterday regarding a letter from a buyer seeking advice. The advice sought was in regards to the questionable policies of an exclusive buyer's agent they claimed was found through NAEBA--which is quoted below:

"1. He stated that his commission was 4% of the total price of the house. 3% of which must be paid by the seller agent and 1% by me. And the combined should be a minimum of $10,400 (if the 3+1% of the home price doesn't come upto 10,400, I have to pay whatever is remaining). Is this the norm? Or is he asking too much?

2. He also stated that he will show only a maximum of 25 houses excluding open houses that we attend on our own. His point was that people usually choose from 10-15 houses that they see. If we do not find a suitable one within the first 25, the Retainer fee of $1,500 will have to be forfeited. Is this reasonable?I appreciate your input towards these questions. Once again, thank you very much!"

Source: ThinkGlink.com

While this is certainly alarming, this in no way reflects the policies of all exclusive buyer agents. These are the questionable policies of only one person. As with everything else in life, there is good and there is also bad. This is a universal truth that applies to services in all industries. This is why it is important to open the lines of communication, so that policies can be discussed upfront and negotiated, if necessary.

United We Stand, Divided We Fall: Buyer Agency and the Fragmented World of Real Estate

In a recent Accredited Buyer Representative class, it came as no surprise that out of approximately 36 attendees, there was only one exclusive buyer’s broker in attendance. Although most of the information presented in the class was informative, insightful, and the content was well-delivered, it was alarming when two Realtors announced to the class--on two separate occasions--the “old saying” that “buyers are liars.” The first thought that came to mind was, “why?” If these Realtors really believe that buyers are “liars,” then why are they even in this class to begin with? Unfortunately, with the exception of a very small few, this is a pervasive belief among traditional agents and brokers—a belief not shared by those who have chosen to serve buyers only.

This was a three-day class, and each day was eight hours in length. It was just enough time to experience the “niceties” of certain traditional Realtors, who demonstrated their narrow-minded worldviews, values, and norms. Some had behaved abrasively, as well as, condescending. They revealed their own prejudice beliefs, as many before have done in the past, that unless one is part of the herd, they do not deserve any professional courtesy.

It was an eye-opener to see the friendly expressions of certain Realtors suddenly change into seething animosity, when told of the decision to represent buyers only. You would have thought a mortal sin had been committed. The consumer value of having the option to avoid dual agency completely did not compute within the minds of these people.

Some traditional agents have gone as far as to say that dual agency is not even an issue, as long as consumers liked them. However, it is an issue when the dual agent cannot negotiate for either side; or when a dual agent company has to remain neutral in the midst of a transactional conflict. What are dual agents being paid for, if they cannot provide the valuable service of negotiation, and if they cannot provide advocacy for neither side?

Now we turn our attention to the culture of exclusive buyer agency. This culture is small, but growing—struggling for recognition and acceptance by Realtor associations that normally favor traditional real estate brokerages. The associations they struggle with do little to educate the public about the option of exclusive buyer agency. Furthermore, they add to the confusion by blurring the real meaning of this agency option. For example—the Washington Association of Realtors has a standard pre-printed form called an “Exclusive Buyer Agency Agreement,” yet there is a clause within this form that gives the option to consent to dual agency. If an agreement is truly for exclusive buyer agency, then dual agency should not even be a part of it, because dual agency is a non-issue where this agency option is concerned.

Honestly, a buyer agency agreement becomes exclusive only when the option of dual agency has been removed--otherwise, it is just a buyer agency agreement.

Delving further into the world of exclusive buyer agency, we see a rift within the fragment. This culture is centered on an association that has let former members down in the past. This association is NAEBA. Instead of unity and camaraderie, there were arms-length adversarial attitudes within the group, and no support—as promised in their membership literature. When an exclusive buyer agent breaks away from the disappointing experience, they are then discredited for not belonging to the organization anymore. For example—in a recent Blog—an exclusive buyer’s broker touted the news of an article he claimed was recommending that buyers only work with exclusive buyer agents who are members of NAEBA. However, upon review, it was realized that the article only mentioned that buyers can find an exclusive buyer’s agent through NAEBA. The article made no specific endorsement advocating the sole use of NAEBA members.

It needs to be said that not all professional exclusive buyer agents are NAEBA members, mostly for the reasons already mentioned above.

The final fragment we will explore in the real estate industry is the culture of the discount brokers. Like the exclusive buyer agents, they are new to the industry, and they have also drawn the ire of the industry for going against the traditional ways of doing business. However, they have taken an adversarial position against all Realtors, including buyer agents, and inadvertently exclusive buyer agents. They have unfairly shrouded the entire industry under a cloak of suspicion—leading many consumers to believe that they are the only credible option available. Because certain discount brokers have ties to the media—which is notorious for delivering biased information—they are able to spread their inaccuracies nationwide. They profess that consumers are victimized by the industry, yet they fail to take into consideration that not all real estate professionals are alike. They are content to make sweeping generalizations about matters they are not fully informed on. Certain discount brokers contradict themselves by claiming that they do not practice dual representation (dual agency), yet if a buyer purchases a property through them, and the property is listed with their company, this is dual representation on the part of the company.

Bottom line:

The real estate industry is about serving the best interests of our clients, period. It is not about our egos. It is not about our “net gross sales last year,” nor is it about out-selling “Sally Sells-A-Lot” next door. It is not about spreading deceitful propaganda and half-truths to induce consumer action, and it is not about suppressing valuable agency options—nor alienating the practitioners that choose to make these agency options available. It is only about the welfare of consumers, respecting their right to be represented, and respecting their freedom to choose how they want to be represented. They have a right to full disclosure as to what their agency options are, because without full disclosure, they cannot make fully informed decisions on matters that can materially affect them.

Food for thought:

Will the real estate industry ever gather and reconcile its fragments for the sake of consumer welfare? Will real estate professionals ever learn to respect each other, and the diverse cultures that have evolved within the industry? Will old-school Realtors ever learn to understand that these diverse cultures are no less deserving of professional courtesy and mutual respect? Will certain discount brokers ever stop spreading inaccurate propaganda and half-truths to induce consumer behavior? Time will surely tell.

Positive change in the real estate industry will require integrity, diplomacy, transparency, tolerance, mutual respect, and understanding. Until we have these ingredients, we cannot fully serve the best interests of consumers, nor can we become a united industry.

The Mortgage Meltdown, and What it Means for Homebuyers

We live in chaotic times, and now with foreclosures on the rise, this chaos has extended itself to the mortgage market. The impact of this has caused mortgage investors to lose confidence, which has reduced the amount of cash available for new loans. A recent news piece by the Associated Press reported that, “The shocks to the industry are siphoning lenders and cash away from the market, which reduces competition and restricts people’s access to home loans.”

With the loss of available cash for new loans, lenders have tightened their lending requirements, and some lenders have been forced to go out of business—filing for bankruptcy. According to an article by RISMEDIA entitled Mortgage Mayhem, the reason for the fiasco in the mortgage market, “…is largely based on the fact that market conditions in both the secondary mortgage market and the national real estate market have deteriorated to the point that many mortgage businesses are no longer viable or as profitable as before.”


So what does this mean for homebuyers?

It means that it is now more difficult for buyers with less-than-perfect credit to qualify for a mortgage. The Associated Press had quoted George Hanzimanolis, president of the National Association of Mortgage Brokers , “lenders have raised the minimum credit score that qualifies for financing. Most lenders now require bigger down payments, he said, and are eliminating exotic loans or making them more difficult to qualify for.” He mentioned, “The silver lining is that people with good credit who can document their income have the same access to home loans as they did a year ago.”

First time homebuyers will have a tougher time buying their first home, but hope is not completely lost. The condition in the mortgage market now requires first-timers to do a little more planning, and more saving for the future. Buying a home is not only one of the biggest financial investments of a person’s life, but it is also one of the biggest responsibilities. It is worth taking the extra time to plan and wait—making sure that all financial considerations are in order, saving enough money for a larger down payment—with some savings left over—and making sure that credit scores are brought up to justify a lower interest rate.

If a buyer's income is good, but for whatever reason, they cannot qualify for a mortgage, then there is the option of lease-to-own. This is a good way for buyers to be in a home, while improving their situation to qualify for a mortgage in the future. Considering the current condition in the mortgage market, more sellers might be willing to entertain such an arrangement if buyers can demonstrate that they have a steady job situation, and they can support the monthly lease payments.

Buyers will benefit in the long-run from the stability that results with making smart financial decisions. Timing is everything, and this principle certainly applies to buying real estate.

Open Response to Article: Discounters are Changing Ways of Doing Business

This is in response to an article dated July 29, 2007 entitled, "Discounters are changing ways of doing business."

In particular, to the following:

"The primary source of contention between the rest of the real estate industry and Redfin is that the company lists 'days on market' and price reductions on its Web site - information that agents do not offer until they have an exclusive contract with a buyer."

There seems to be some confusion here, because the majority of real estate professionals do not use exclusive buyer agreements with buyers. However, exclusive listing agreements are regularly used with sellers to list their properties.

Exclusive buyer agency agreements are mostly, if not totally, used by exclusive buyer agents and brokers, who work for companies that only represent buyers. These companies never take listings. The exclusive buyer agency option helps buyers avoid dual agency completely. There are some exclusive buyer offices that will offer FULL service and representation to buyers for the same amount of money a company like Redfin charges for limited services.

A company like Redfin also takes listings, so when a buyer makes an offer to buy through such a company, and the same company holds the listing of the subject property, the company becomes a dual agent. Dual agents are required to remain neutral between buyers and sellers in the same transaction. This can become a problem when a conflict arises between the two parties. Buyers and sellers must give their mutual consent to dual agency, which is unwise because it is a conflict of interest.

Dual agency is a conflict of interest, because when a buyer chooses an agent, they will expect their agent--and their agent's company--to represent their financial interests. Buyers want the lowest price possible, at the best possible terms in their favor. Conversely, a seller will expect their agent--and their agent's company--to negotiate for the highest price possible, at the best possible terms in their favor.

When a buyer and seller are represented by the same agent, or respectively by two different agents of the same company, these expectations are conflicting. This is dual agency, aka. dual representation. More consumers are becoming aware of the risks surrounding this agency option.

More Information Sources About Dual Agency:

http://www.dos.state.ny.us/cnsl/dualagcy.html

http://www.realestatelawyers.com/Dual-agency.cfm

http://www.usdoj.gov/atr/public/workshops/rewcom/213172.htm

New Learning Tools for Consumers from Mortgage Brokers Association

The Mortgage Brokers Association recently announced a new resource for consumers to help them make informed decisions about mortgages, and to teach them how to compare mortage products, as well as, how to choose the best one for themselves. This comes in response to the recent mortgage crisis that occurred within the subprime market. MBA is taking a leadership position in creating the resources needed to empower consumers, so that this crisis is not repeated in the future.

To quote the MBA's message from the home page of their new web site:

HomeLoanLearningCenter.com

"The HomeLoanLearningCenter.com provides step-by-step information on how to become financially literate. Armed with the facts, your next move could be into your own home. Learn about credit reports and scores; the true cost of owning a home; and how to compare the costs of owning versus renting a home. The Web site provides in-depth, easy-to-read home loan product information in the All About Mortgages section, which includes information on how to qualify for a loan, what the documents mean, what's in the mortgage payment and mortgage calculators to help consumers plan their payments."

Fair Fight in the Marketplace

This film is brought to you by the collaborative efforts of: Street Law, Inc, the American Antitrust Institute, Filmmakers Collaborative, and the Constitutional Rights Foundation.

This is a documentary about what antitrust laws are, and what they mean to everyone—consumers, small businesses, entrepreneurs, free enterprise, etc.

It is now airing on PBS—but, if it is not airing in your area, you can watch it here. Before positive changes can happen, we must all be aware of the problem—and most importantly—we must care about the problem, because antitrust affects us all in many different ways, and in many different industries; including the suppression of exclusive buyer agency in the real estate industry.

Learning resources are available by visiting www.fairfightfilm.org/learn.html




If you would like to help--spread the word about this film!

Buyer Agency and Fiduciary Duties: No Nonsense Here

In a recent blog, I read one person's argument stating that: "fiduciary duties and buyer agency cannot co-exist based on the current method of compensation."

While I can appreciate that this person is expressing his views, I have to say that I totally disagree with this idea, because--as I pointed out to this person--not all real estate agents are the same. Not all will share the same worldviews, values, and norms.

Although Washington state may not require real estate agents to provide fiduciary duties, it does not mean that they cannot, or should not, provide such duties. His blog was based on the quote of a local Realtor--found in a story by the Seattle Times called, "Agent commissions inching upward," that said:

“In a market flooded with unsold listings, she says, a 3 percent co-op split 'is always going to attract more attention than 2 percent. We call [inadequate splits] ‘getting eliminated at the office.'”

My response:

"This is only one agent’s perception–and there may be others that share this view, but this person does not speak for all agents, or brokers. She certainly does not speak for me. I am an Exclusive Buyer’s Broker, and my only concern is showing properties according to what my clients need, and what they can afford. I earnestly make it a point to maintain fiduciary duties with my buyer clients–and because of this–I don’t take listings.

It is not right, nor is it fair, to make sweeping generalizations about buyer agents, because it is a fact that not all real estate agents–let alone buyer agents–operate in the same way, nor do they all maintain the same values."

The Six Essentials of Qualifying for FHA Loans

While FHA is a very helpful program designed to help Americans achieve homeownership, there are a few helpful things to know about what it takes to qualify for this type of financing. The six main points of pre-qualifying for this type of mortgage program--as described by fha.com--include, as a rule of thumb:

1. Steady employment history, at least two years with the same employer.

2. Consistent or increasing income over the past two years.

3. Credit report should be in good standing with less than two thirty day late payments in the past two years.

4. Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.

5. Any foreclosure must be at least three years old with good credit for the past three years.

6. Mortgage payment qualified for must be approximately 30 percent of your total monthly gross income.

For more information about FHA mortgages, and other helpful homebuying tips, please visit the official web site of the U.S. Department of Housing and Urban Development (HUD). FHA can help buyers whether they are first time homebuyers, or they are buyers who would like to buy and renovate a fixer. FHA also has a reverse mortgage program for seniors, as well as, programs for buyers of manufactured homes. Information about these different programs can be found by visiting HUD's loan program page.

Basic eligibility requirements for an FHA mortgage can be found through their knowledge base.

Tighter Lending Rules Keep Some Buyers Out

In response to the current situation in the mortgage market, where foreclosure rates are at an all time high, lenders across the board are tightening up their lending requirements, making it more difficult for buyers to qualify for a mortgage.

Gone are the days of 100% loan-to-value mortgages. While some may see this as a barrier to homeownership, it is actually a blessing, because nothing is more financially devastating than a foreclosure on one's credit history. According to Carolyn Said of the San Francisco Chronicle, who interviewed a number of larger lenders, explained that the new standards fall into the following areas:

"Ability to repay. Buyers are no longer being qualified at the low initial rate. They must qualify for the loan payments at rates equal to what the loan would be if it reset at a higher rate."

"Down payment. Lenders want buyers to put some money down, even as little as 5 percent or 10 percent. Loans for 100 percent of the price are very hard to get."

"Credit score. Credit scores range from the high 300s to the low 800s. Borrowers with a credit score above 680 are likely to qualify for a reasonable deal. Between 660 and 680, they may qualify, but the deal could be pricey. Potential borrowers with a score of 620 or less need to raise their scores before they can qualify."

"Income and income verification. Producing proof that a borrower has a job is key; “stated income” loans are much more difficult to get. Also lenders are unlikely to approve a loan in which the home buyer will spend more than 45 percent of his gross income paying off debt, including paying the mortgage."

Cite Source from Realtor Magazine,click here.

While these changes may delay homebuying plans for some buyers, this is actually a blessing in disguise--because these new standards will cause buyers to improve their financial situation before taking on the huge financial burden of taking of a mortgage. It will also benefit buyers in the long term, because these new standards will ensure that they stay on path to a healthy financial future. For buyers who are financially capable of maintaining mortgage payments, but who do not qualify due to credit scores, there are still alternatives available such as lease-to-own.

However, buyers need to keep in mind that a mortgage will come into the picture, at some point in the future. Therefore, buyers who choose this route should plan to financially position themselves during the lease period in order to qualify for a mortgage when the lease period is up. Buyers should also have a decent down payment--at least 10% of the purchase price--to demonstrate financial capability to sellers who would consider lease-to-own arrangements.

Bottom line...

While it is now tougher to qualify for a new mortgage, the path to homeownership is not dead in the water. It just takes more long-term planning and financial considerations on the part of buyers, which will only help to benefit them over the years. It is well worth the peace of mind that buyers will have--knowing that they have made the right moves to make sure they can stay in their homes, and stay on the right path to a secure financial future.

Why Buyers Do Not Pay Commissions on Listed Properties

A real estate company is misinforming the public by saying that buyers actually pay for real estate commissions on listed properties. According to information on their web site, "the buyer is the only person bringing a checkbook to the closing, and both commissions come out of the money the buyer provides."

While it is true that buyer's bring the money to the table, the seller's costs of sale are not the buyer's expense or responsibility. If buyers actually paid commissions, they would be paying the purchase price PLUS sales commission. However, this is not the case with listed properties.

The truth is that commissions on listed properties are actually deducted from the seller's side of the closing statement--not the buyer's side.

This means that the seller receives the purchase price first, and then his or her costs of sale are simultaneously deducted to result in net sale proceeds. The notion that buyers pay commissions on listed properties makes about as much sense as employers paying for their employee's income tax deductions. For example--an employee's paycheck--he or she must receive his or her pay first (aka. gross pay) before taxes are simultaneously deducted to result in the employee's net pay.

Likewise, buyers do not pay the seller's costs of sale on listed properties, because these costs are deducted from the seller's gross sale proceeds, which gives them their final net sale proceeds.

It needs to be said that inciting consumer bitterness with skewed information is wrong. It is better to bring about positive changes in the real estate industry without distorting the truth. Buyers can save money by negotiating buyer rebates with agents or brokers in states where it is allowed. It is not proprietary to the company mentioned in this news story.

In Response to 60 Minutes Story

The following was in response to a story done by a reporter for 60 Minutes entitled "Chipping Away at Realtor's Six Percent.". Many comments posted in response to this story were from misinformed people who made unfair sweeping generalizations against all real estate professionals.

*****Posted Comment Begins*****

In Washington State, commissions are negotiable. It is illegal to set commission rates. I am sure that this is the case in all 50 states, since this is a form of price-fixing--an antitrust violation. If sellers want to lower commission rates, then they need to speak up and negotiate it down. If listing agents "don't allow" less than 6%, then THOSE listing agents need to be reported. However, to say that all real estate agents and brokers are bad is, not only ridiculous, but it is also a sweeping generalization that is unfair to those who are honest, good, and who work very hard for the clients they serve.

As far as rebating buyers, some states don't allow this. However, in the states where it is allowed, a buyer can negotiate a rebate with ANY exclusive buyer's agent--or any real estate agent, for that matter. Exclusive buyer agents, however, only work for buyers. They are non-traditional, as discount brokers are, and their priority is to get their clients the lowest price possible on the properties they buy.
Exclusive buyer agents are truly pro-consumer. They don't take listings, and neither do the companies they work for, so there is never a chance of dual agency--which is a conflict of interest.

Dual agency is a conflict of interest, because a seller expects their agent (and their agent's company) to get the highest price possible for their property, while a buyer expects their agent (and their agent's company) to help them negotiate the lowest price possible.

When there are two agents working for the same real estate company, and they are working on opposite sides of each other in the same transaction--these commitments are conflicting. This is dual agency, or "dual representation," on the part of the company.
Dual agents are required to remain neutral to both parties, meaning, that neither buyer nor seller receive the level of service they originally expected, and signed-up for. However, with Dual Agency, the real estate company makes double commissions. It is a long-standing practice in the real estate industry called "double-dipping."

The company being interviewed in this news story has contradicted itself by claiming that they do not allow dual representation (as stated on their web site), yet they take listings--so if a buyer wants to make an offer through them, on a home listed with their company--this is dual representation (aka. dual agency) on the part of the company. A dual agent will make money from both sides of the same transaction, while remaining neutral to both sides. Who is really benefitting here?

Buyers can completely avoid dual agency by hiring an Exclusive Buyer's Agent or broker, because they do not take listings--and neither do the companies they work for. They will also work very hard to save their clients money, because a satisfied client means the possibility of a long-term business relationship.

A True Greater Good in the Real Estate Industry

There was a recent blog from a Realtor discussing the "Skyhook Theory" in real estate. He basically explained that this theory encompasses the principle of finding a greater good in the things we do--and that aspiring to do this makes us better people. While I earnestly believe and agree that finding the greater good in all things is the ideal way to be, the reality of the situation in the real estate industry, is that the greater good is generally neglected when it comes to consumers.

The greater good in the sense of the real estate industry is not just about touting superior service, because a higher level of service should go without saying. I believe that the greater good goes much deeper than that. It should be about ensuring equal footing for buyers and sellers alike. It should be about real estate professionals doing everything they can within their power to prevent either side from being exposed to dual agency--which is a conflict of interest.

It should mean that traditional real estate companies demonstrate a willingness to relinquish the age-old tradition of double dipping--which happens when one real estate company collects commissions from both sides of the same transaction. It should mean that the real estate industry, as a whole, be completely honest with real estate consumers about all available agency options--including Exclusive Buyer Agency.

Not so long ago, real estate was ruled by seller representation. This is no longer the case. The real estate industry is, and has been, transforming to a level playing field between buyers and sellers. As more consumers become aware of dual agency, they are realizing that it is not in their best interests to consent to it, because dual agency is a conflict of interest. The way buyers can be assured that an agent is truly working for them, is by hiring an Exclusive Buyer Agent, or an Exclusive Buyer Broker.

Until the real estate industry owns up to what is truly in the best interests of consumers, we cannot really begin to speak about a greater good in the real estate industry.

The Importance of Honest and Direct Communication in Real Estate

The relationship between real estate consumers and real estate professionals is that of a partnership, and a team. It means that they are working together to get the best possible results, whether one is buying or selling real estate. It is of great importance to have direct and honest communication. Without establishing this, goals cannot be accomplished, and trust can break down. Having honest and direct communication will put a working team on the right path. Important issues will be clear, and there will be synergy between team members.

According to a book called "Tools for Teams: Building Effective Teams in the Workplace" by Leigh Thompson, Eileen Aranda, and Stephen P. Robbins:

"Finally, teams develop synergy. Synergy means that team members together achieve more than each individual can. Whereas group members combine their efforts to achieve their goals, teams reach higher performance levels." (Thompson, Aranda, Robbins p. 6)

An effective team is not developed through hearsay. I recently declined a buyer referral because the buyer wanted to communicate through a third-party, instead of communicating directly. Working under these conditions does not make sense, because it leaves too much room for misunderstandings to develop. It should go without saying that real estate is not the place for hearsay. It is important that prospective clients are willing to communicate honestly and directly. Clients should be open, honest, and straight-forward about their situation. This allows an agent or broker to give them the best level of service.

Direct and honest communication prevents the possibility of a misunderstanding or confusion. It is not only a matter of principle, but it is also a matter of common sense, because it is critical that clients maintain clear communication with their agent or broker during a real estate transaction.

Keeping these things in mind will ensure success, synergy, and positive results, as well as, a satisfying closing experience for all members of a real estate team.

A Word to Relocation Companies About Exclusive Buyer Agency

As an Exclusive Buyer Agent, I feel it is my duty to educate the public about the purest form of buyer representation. Here is what I recently sent to Promissor, a relocation company, which claims to value the avoidance of conflicts of interests. They were not clear about whether or not they had Exclusive Buyer Agents among their service providers. However, it needs to be said that in order to ensure that their clients' employees are truly free of conflicts of interest, relocation companies should make certain that their clients' employees are not exposed to the risk of dual agency, which is a conflict of interest.

In essence, relocation companies should stand by the things they claim to value, like avoiding conflicts of interest--or else their claims become only empty promises.

**********Letter Start***********

Hello Mr. Gimpel,

Your web site states the following:

"Consider the advantages of independence - yours and ours. Promisor Relocation is independently owned, meaning we're free from any obligations to affiliated companies and flexible to do what's best for our clients. No conflicts of interest, no hidden agendas. Quality is our only criteria."

However, you should know that if your established resources do not include Exclusive Buyer Agents that you place your clients' employees at risk of dual agency, which is a conflict of interest. I can appreciate that you value the best interests of your clients, and that is why I thought it best to inform you about the transitioning state of the real estate industry. Just to let you know, dual agency happens in one of two ways: (a) when an agent or broker represents buyer and seller, or (b) when two different agents, representing buyer and seller respectively, work for the same real estate company. The real estate company becomes the dual agent.

I am giving you this information, because you will not get the truth from traditional real estate companies. However, since your company web site states that you have a concern for preventing conflicts of interest, I thought you should know this very important information. Good luck!

Three Things to Consider Before Relocating to a New Area

If you have been researching information about the relocation process online, in almost every article, you will read about how very stressful it can be. It is reasonable to say that one will most likely experience some degree of culture shock, because lifestyles can vary dramatically between states, including the cost of living. Here are three things to consider for eliminating the anxiety of relocation:

1. Take some time to visit the area you are considering.

A little familiarity will go a long way, when it comes to knowing whether or not the area will suit your taste and lifestyle. Planning a vacation to the new area is the ideal way to experience the area and what it has to offer. Brochures and pamphlets can only do so much. If your move is job related, you will likely have a few home-hunting trips paid for. However, don’t use this time to get familiar, as you will likely be under some kind of pressure to find a place. Instead, it would be better visit the new area outside of this paid house-hunting time, so you can relax while you see the sights, and all that the area has to offer. By doing this, you will establish a degree of familiarity that will ease any potential “culture shock” when relocating to a new state, and your planning will also benefit from the insight you gain from your visit.

2. Research and plan your move well in advance.

If you can help it, put time on your side. The more time you have to plan your move, the better your plans will be, and the better your move will turn out. There are many resources on the Internet that will help make your plans as solid as possible. For example, MyDreamLocale.com has area reports that tell you about an area’s cost of living, schools, crime reports, etc. It will also let you do area comparisons, which is always good when deciding where to move. Another resource you can find on the Internet is a move planner. Moving.com has a free move planner that you can use, along with other resources on their site, to help you plan a painless relocation.

3. Find an Exclusive Buyer’s Broker or Agent in the new area.

When you have done your research, visited the new area, and you have invested enough time into your planning—you are now ready to find an Exclusive Buyer’s Broker or Agent, if you did not find one already during your initial visit to the new area.

An exclusive buyer’s broker or agent is one who works for a real estate company that does not take listings. Exclusive Buyer Agency is the purest form of buyer representation. It helps buyers completely avoid Dual Agency—which is a conflict of interest. More and more buyers are realizing that they can get caught in a dual agency situation in one of two ways: (a) When the same broker or agent represents both buyer and seller in the same transaction, or (b) when two different agents, one representing seller and the other representing the buyer, works in the same transaction for the same real estate company—their company becomes the Dual Agent.

The best thing for consumers is for them to have their own real estate representatives, separate and apart from the other side in order to completely avoid dual agency, and not giving consent when asked to give it. As a consumer, you should stand firm when it comes to protecting your interests, and being clear about who is working for you is one of the best ways you can ensure that they are protected.

Lastly, if your relocation is job-related, you should be clear on whether or not you will be able to choose your own real estate agent. If not, you should make an effort to negotiate with your employer to, at least, help you avoid dual agency by asking your employer to instruct their relocation company to assign an Exclusive Buyer's Agent to represent you in the purchase of your home in the new area.

Exclusive Buyer Agent: New Home Builder Review

On Tuesday, I viewed some very nice homes about a mile south of Hwy 16 in Port Orchard by Quadrant Homes. Nestled within the community of McCormick Woods, the area is an even mix of both new and existing homes. While the development is fairly new, their neighborhood map shows that most of its Division I lots are sold. However, there are still lots available within Division II.

Some highlights of the model homes I viewed were the lofts that were at the top of

their respective staircases. Although there is an option to make these lofts into an additional bedroom, having a loft at the top of the staircase adds a private living area to the upstairs; which I think is very nice, and it is right in line with Quadrant’s claim that their homes “are designed to use all available space as efficiently as possible.” (Quadrant Homes booklet p. 3).

Another notable feature is this builder’s eco-friendly building practices. According to their brochure, they are a founding member of the Master Builder Association’s Built Green Program. Buyers who purchase their homes will also have an opportunity to become “members of a local land conservation organization and contribute to the preservation of natural resources” (Quadrant Homes booklet p. 5).

While all of these points are very good, what I found most impressive about the work ethics of is this builder is that they work with buyer agents, and they respect their client-broker relationships. This means a lot, because it means that buyers can avoid dual agency. After all, the builder is the seller.

This builder has a proprietary homebuying process that includes Community Sales Managers, Home Mortgage Consultants, Superintendents, and Personal Service Representatives. Although they have their own mortgage consultants, the builder states that buyers are free to choose their own lender. I should add, for buyers who are interested in shopping around for the best mortgage rate, that they should go with a lender that is well-versed in new construction lending. If you are considering buying a new home, this would be the first important question to ask any lender outside of the builder's in-house mortgage consultants. With that being said...

Here are some photos from my tour:

First Home Viewed (2011C):

Second Home Viewed (2323A)

Third Home Viewed (2733B):

Fourth Home Viewed (2431A):

Buyer Beware: Read Mortgage Documents Before Signing Them!

Closing day can be a very hectic and stressful time. However, I cannot stress the importance of taking the time to read the fine print of your loan documents before signing them. It could be your last chance to spot items that need correction before they are recorded, and before the loan funds.

For example, if you told your lender that you preferred a fixed rate, and after taking the time to read the fine print, you discover that the loan documents show the mortgage will actually be adjustable, you can have this corrected before you go through with closing. It will be too late if you wait until after closing.

Make sure you read everything, or if you have an attorney, have them review these loan docs for you. Don't let anyone pressure you into signing without reviewing your mortgage documents, and make sure that you clearly understand what you are agreeing to. All questions should be addressed prior to signing your loan documents, and all corrections should be made prior to signing your closing documents.

It will be well worth the peace of mind you will have when all is said and done.

The Truth About Exclusive Buyer Agency Services

Exclusive Buyer Agency - A Value to Buyers:

Many traditional agents and brokers have nothing good to say about exclusive buyer agency, for the obvious reasons. The truth of the matter is that exclusive buyer agency offers something that traditional agencies do not; loyalty and commitment to the buyer only--without any possibility of dual agency conflicts.

An exclusive buyer agency agreement spells out in writing the expectations between client and broker. It is a negotiable instrument that protects both broker and client. It demonstrates that a buyer is serious, which allows room for other types of negotiations--such as buyer rebates. It will contain a cancellation clause that will allow a buyer or agent the option to cancel the agreement, should either party decide that the association is not working for them. It establishes mutual respect, loyalty, confidence, honest communication, and trust--five elements that create a fantastic working environment and team synergy.

If a client does not agree with certain elements of the proposed agreement, then they should raise their concerns and negotiate for better terms. The best agreements are those that are win/win, meaning that both client and broker feel good about the terms negotiated, as well as, feel good about working together. It is very important to establish honest communication, mutual respect, trust, and loyalty between broker and client upfront--and this is the primary purpose of the agreement.

An exclusive buyer agency agreement assures a buyer that the agent or broker working with them is only working for them. It means that they will have maximum choice of available properties, listed and unlisted, as well as, properties that are both on and off the market. It also means opening up the possibility of negotiating special terms, as already mentioned above.

Favorable feedback from traditional real estate brokers and agents about exclusive buyer agency is highly unlikely:

Buyers need to understand that getting honest feedback about exclusive buyer agency from traditional agents or brokers is highly unlikely, because their priority is to get your business, and if their company takes listings, they will not be able to sign an exclusive buyer agency agreement with you even if they hold an ABR designation.

Their first priority is to keep your business with them, and not necessarily talk to you about the purest form of buyer representation; which is always the best option for buyers. As a matter of fact, there is plenty of mixed information on the Internet regarding whether or not a buyer should sign a buyer agency agreement, let alone an exclusive buyer agency agreement. The negative information found happens for reasons already described above.

Working with clients:

As a policy, my company only works through exclusive buyer agency agreements, also known as, Service Engagement Letters. While there are some buyers out there who prefer not to work this way, we prefer not working with such buyers, because clients receive the highest levels of loyalty, integrity, advocacy, and commitment. Therefore, it is only fair to expect the same in return. Ideal clients understand that it is a good thing to give and receive mutual consideration and commitment in writing--as all real estate agreements are supposed to be.

A Word About Fees:

Fees are negotiable and depend on the type of property purchased, for example, if the property is listed or unlisted. For properties listed on the MLS, fees are covered by the “Selling Office Commission” through the listing company. This means that clients receive the purest form of buyer representation at no cost to them. While there are real estate companies out there that would like the public to believe that buyers actually pay for real estate commissions on listed properties, the truth, is that commissions on listed properties are deducted from the seller's side of the closing statement, not the buyer's.

This means that the seller is paid the purchase price first, and then his or her costs of sale are simultaneously deducted to result in net proceeds. The notion that buyers pay commissions on listed properties makes about as much sense as employers paying their employees income tax deductions. An employee must be paid by his or her employer first (aka. Gross Pay) before taxes are simultaneously deducted to result in an employee's Net Pay. Hence, an employee pays his or her own income taxes through automatic deductions. The employer does not pay the employees income tax deductions--just like in real estate--buyers do not pay the sellers costs of sale on listed properties. The seller's costs of sale are deducted from "Gross Sale Proceeds" to result in "Net Sale Proceeds."

Buyers can owe commissions or flat rate fees, however, if they desire to include unlisted or off-market properties in their search--unless a seller agrees to cover the cost. This would require negotiating with the seller to pay some, if not all, of the fee. Since our fee is generally less than what a seller would pay to a traditional real estate company, a motivated seller should not have a problem with this. However, the portion that is not covered by the seller would be owed by clients at closing.

Clients have the choice of limiting their property search to only MLS listed properties, or including unlisted and off-market properties. It is entirely up to them, how they would like to go about it.

The bottom line:

Clients have the opportunity of customizing their own exclusive buyer agency experience to fit their individual needs, while completely avoiding dual agency, designated agency (just another name for dual agency), and the limitations of single agency. It only takes communication, honesty, and a willingness to reciprocate mutual respect.

Search Residential and Commercial Properties on WorldInvestments.com!

Our web site now offers residential and commercial property search capabilities on WorldWestInvestments.com. Some of these new features include Realty Watcher, where prospective homebuyers can keep track of the market, and a "Sold" section, where a buyer can research what properties have sold for. Be sure to visit us often for more innovative developments!

The Agency Debate Rages On

I recently came across a blog entitled Exclusive Buyer Agency Discussed in Realtor Magazine Online written by fellow EBA, Stephen Scholls, from Buyers Broker Of Northern Michigan, LLC. His blog was a synopsis of an article done by Realtor Magazine Online, which intended to gather the views of perceived innovators in the real estate industry, regarding their opinions of where they believe the real estate industry is heading.

When three brokers were asked where they saw exclusive buyer agency heading in the coming years, it was not surprising when all three responded negatively, since they were all from traditional real estate firms. What I did find surprising, and Stephen pointed this out in his synopsis, is that Realtor Magazine Online did not even consult with brokers who actually work in the field of exclusive buyer agency. This caused me to question the motives of the magazine, as well as, question the association behind it. As a Realtor member in good standing, it concerns me, because it means that my trade association does not support my company's business model. By not consulting with brokers working in the field, they demonstrate a bias in favor of traditional agency, which can introduce the risk of dual agency to consumers.

The general negative attitude towards exclusive buyer agency is apparent in the comments made on Stephen's blog by those who do not fully understand the need to completely avoid the risk of dual agency. Some believe that most consumers do not know, and could care less, about exclusive buyer agency; but, would consumers not care if an issue arose in their purchase, and their "designated agent," aka. dual agent, had to remain neutral to both parties? No one wins with dual agency, neither buyers nor sellers.

Some brokers believe that exclusive buyer agency will not last. Their reasoning is that listings have traditionally attracted buyer leads. While there is some truth to this, it is a truth that is in transition, as more consumers become aware of the risks posed by dual agency, aka. "designated agency." Real estate consumers are not simple-minded, nor are they stupid.

To imply that consumers do not have the ability to understand or care about agency issues is downright insulting to them.

There is a general confusion about agency issues that seem to be generated by those who are intent on muddying the waters, and it is worsened by law makers. Introducing terms like "designated agency" and "single agency" are designed to compete against exclusive buyer agency, but the truth, is that "designated agency" is only dual agency called by another name, and "single agency" means that a buyer will not see properties listed by their agent's company.

The bottom line, is that exclusive buyer agency helps buyers completely avoid dual agency, while having access to all properties, whether they are listed or unlisted. Buyers do not win with "single agency" because it limits their choice of available properties.

Smart real estate consumers want maximum choice of properties, with absolutely no risk of a conflict of interest. This is the ideal buying position to be in. This is only common sense.

Here is the comment I posted on Stephen's blog:

"According to Elizabeth Weintraub's definition of single agency: on Ask.com

'Single agency means a real estate broker represents the buyer and cannot show the buyer properties listed by the broker's agency.'

With exclusive buyer agency, the buyer has access to all properties. This includes all listed and unlisted properties. The issue of who pays the buyer's agent is not really an issue, because if the seller agrees to cover the buyer's broker fee to make the sale, it is no different than when the buyer asks the seller to cover closing costs.

The problem with merely being a transaction coordinator/facilitator is that consumers do not get the level of service they should receive when fully represented. After all, this is not like going to Walmart and shopping for clothes, or basic goods and services. This is what real estate consumers need to understand. No two real estate transactions are identical, and often times, problems can escalate if not swiftly and properly dealt with (as I am sure everyone here is aware). Knowing how to do this comes from having years of experience, which the average real estate consumer does not have, unless they are also in the real estate business.

Designated agency is just another name for dual agency, in my honest opinion. As more exclusive buyer agents enter the field, and earn the trust and loyalty of their clients, the truth about dual agency, aka. "designated agency," and the downside of "single agency" will become more familiar to the average consumer. Exclusive buyer agency is a virtual infant, when compared to the age of the real estate industry in general. It is only a matter of time, patience, and perseverence on the part of real estate professionals who recognize the importance of establishing a fair and balanced closing table between buyers and sellers, and not introducing the risk of dual agency. Changing its' name is not the solution, but avoiding it is. I firmly believe in exclusive buyer agency, and what it means for buyers, as well as sellers, because no one wins when there is a conflict of interest.

I do not regret choosing to specialize in this field of work. I enjoy educating buyers about dual agency, as well as, helping them to avoid it. It is a calling to do this kind of work, because it is challenging, as much as it is very rewarding."

Here is the feedback I gave to Realtor Magazine Online:

"When asking about the future of exclusive buyer agency, it would have been more appropriate to ask Realtors who have chosen to specialize in this field, and not asking traditional brokers, who will naturally display a negative bias towards it. Did you really expect them to speak positively on this topic?

You do the public a great disservice by presenting biased and negative views from traditional brokers, without presenting the views of brokers who actually practice exclusive buyer agency.

For those who are confused and misinformed, exclusive buyer agency is about the complete avoidance of dual agency, which is a conflict of interest in real estate. No one wins when there is a conflict of interest, especially, when issues arise requiring the dual agent to remain neutral. The truth of the matter, is that exclusive buyer agency is here to stay, and it will flourish in the years ahead."